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New energy vehicles also ushered in the continuation of the policy of exemption from purchase tax after fuel vehicles were granted "exemption" from purchase tax. On July 29th, Premier Li Keqiang presided over an executive meeting of the State Council, which decided to extend the policy of exemption from purchase tax on new energy vehicles.

The policy of exemption from purchase tax plays a substantial role in promoting the consumption of automobile terminal market. According to the Federation of passengers, the cumulative sales of narrow passenger cars from January to June in 2022 fell 7.2% from a year earlier, including 4.4% in January, 4.2% in February, 10.5% in March, 35.5% in April, 16.9% in May and 22.7% in June. According to the data, in the first half of the year, only February and June achieved year-on-year growth, of which June greatly narrowed the decline in the first half of the year. Narrow passenger car sales fell 24.2 per cent from January to May compared with the same period last year, while the figure narrowed to 7.2 per cent from January to June. As for the reason for the increase in passenger car sales in June, mainly due to the stimulation of the traditional fuel vehicle purchase tax halving policy, the superimposed epidemic has been effectively contained, lagging production capacity and consumer demand have been released, and the domestic passenger car market has increased significantly.

As one of the three major supporting policies in the new energy vehicle market (purchase subsidy, exemption from purchase tax and exemption from vehicle and vessel tax), the National standing Committee stressed that "the continuation of the policy of exemption from purchase tax for new energy vehicles" has attracted the attention of the industry.

According to the Tramway report, the policy of exemption from purchase tax for new energy vehicles began as early as 2014 and was originally scheduled to expire in 2017, but considering that this policy has a positive impact on the development of the domestic new energy vehicle market, it was extended by three years in 2018 and two years in 2020.

According to the announcement on the relevant policies of exemption from vehicle purchase tax for New Energy vehicles issued in April 2020, vehicle purchase tax for new energy vehicles purchased will be exempted from January 1, 2021 to December 31, 2022. New energy vehicles exempt from vehicle purchase tax refer to pure electric vehicles, plug-in hybrid (including incremental) vehicles and fuel cell vehicles.

At present, the proportion of vehicle purchase tax is 10%, and the formula is as follows: deduction amount = 10% * [ticket price / (1 + VAT 13%)]. Consumers can enjoy discounts ranging from thousands of yuan to tens of thousands of yuan when they buy mainstream new energy models on the market. Take the rear drive version of Tesla Model Y with an official guidance price of 316900 yuan as an example, the vehicle purchase tax can be reduced by 28000 yuan.

According to the Federation of passengers, the cumulative sales of new energy narrow passenger cars in 2021 increased by 169.1% to 2.989 million vehicles compared with the same period last year. The latest data show that the cumulative sales of new energy narrow passenger cars in the first half of 2022 increased by 122.5% to 2.248 million units compared with the same period last year. At present, China's new energy vehicles present a good situation of "double improvement" in market scale and development quality, and the stable purchase tax exemption policy and purchase subsidy policy play an important role in the development of new energy vehicles.

December 31, 2021, the Ministry of Finance, the Ministry of Industry and Information Technology, the Ministry of Science and Technology, and the National Development and Reform Commission jointly issued the Circular on the Financial subsidy Policy for the Promotion and Application of New Energy vehicles in 2022 (hereinafter referred to as the notice). While the notice makes it clear that the subsidy policy for the purchase of new energy vehicles in 2022 will end on December 31, 2022, vehicles licensed after December 31, 2022 will no longer be subsidized, at the same time, the upper limit of subsidies for new energy vehicles has been abolished.

For new energy vehicle companies, in the case of abolishing the purchase subsidy of new energy vehicles, if new energy vehicles are exempted from purchase tax at the same time, while the prices of raw materials continue to rise, car companies have to reduce profits and manufacturing costs to reflect the rationality of prices, which may also lead to a decline in consumers' desire to buy.

Cui Dongshu, secretary general of the Federation of passengers, believes that the tax exemption policy for the purchase of new energy vehicles is a temporary measure and is bound to face the process of resuming taxation, but he also said, "We should continue to be exempt from one-year car purchase tax in 2023, because we are facing the withdrawal of subsidies for new energy vehicles in 2022, and if a car purchase tax is levied in 2023, it will have a greater impact on new energy vehicles."

Zhang Hong, secretary-general of the New Energy Branch of the China Automobile Circulation Association, also said that although the new energy vehicle industry has changed from policy single-wheel drive to consumption and policy two-wheel drive, consumers' income has decreased due to the epidemic, and the lack of willingness to buy is also an objective reality. Therefore, if you want to continue to boost consumer confidence, extending the preferential policy of purchase tax is a wise choice.

From the point of view of the industry, the new round of car purchase tax relief policy is of great significance in promoting the recovery of people's livelihood demand, especially in stimulating the growth of the demand for first purchase and replacement of cars. In addition, in order to promote automobile consumption, on July 7, 17 ministries, including the Ministry of Commerce, jointly issued the Circular on several measures to enliven Automobile Circulation and expand Automobile consumption. The circular focuses on six major issues, such as the purchase and use of new energy vehicles, activating the used car market, promoting automobile renewal and consumption, supporting parallel import of cars, optimizing the use environment of cars, and enriching auto financial services. 12 specific policies and measures have been issued in view of the above six areas.

The measure makes it clear that it will support the purchase and use of new energy vehicles, prohibit all regions from setting up a local catalogue of new energy vehicle models, prevent regional protection, and enhance the circulation of new energy vehicles, and will continue to study the extension of the tax relief policy for the purchase of new energy vehicles. At the same time, we will actively promote new energy vehicles to the countryside and promote the consumption and use of new energy vehicles in rural areas.

Revitalizing the active second-hand car trading market is also one of the key points of this circular. The measures show that unreasonable restrictions on the distribution of used cars will be gradually lifted, and enterprises that register their residences and operating fields can carry out used car sales business. The notice also made it clear once again that the previously announced policy of abolishing restrictions on the movement of used cars will continue to implement and improve the relevant management regulations on the registration of used car transactions, aimed at transforming and upgrading the used car industry, making it bigger and stronger, and actively promoting the commercialization and scale of used cars.

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